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US job growth stalls, recession fears rise

Associated Press     September 2, 2011
Employers stopped adding jobs in August, an alarming setback for an economy that has struggled to grow and might be at risk of another recession .

The government also reported that the unemployment rate remained at 9.1 per cent. It was the weakest jobs report since September 2010.

Stocks tumbled on the news. The Dow Jones industrial average sank more than 160 points in morning trading.

Total payrolls were unchanged in August, the first time since 1945 that the government has reported a net job change of zero. Economists warned that the economy can't keep growing indefinitely if hiring remains stalled.

"Underlying job growth needs to improve immediately in order to avoid a recession," said HSBC economist Ryan Wang.

Fears that the United States will slip back into recession have been rising since the government reported over the summer that the economy barely grew in the first half of the year. Consumer and business confidence has been sapped by the political standoff over the federal debt limit, a downgrade in the U.S. government's credit rating and a debt crisis in Europe.

Job growth had already been sputtering before it stalled completely last month. The economy produced an average 166,000 a month in the first quarter, 105,000 a month in the second quarter and just 28,000 a month so far in the third quarter, said John Silvia, chief economist at Wells Fargo.

The dispiriting job numbers for August will put more pressure on the Federal Reserve, President Barack Obama and Congress to find ways to stimulate the economy. So far, Fed Chairman Ben Bernanke has been reluctant to try a third round of bond purchases designed to jolt the economy by further lowering long-term interest rates.

Obama next week will deliver a rare address to a joint session of Congress to introduce a plan for creating jobs and boosting economic growth. But House Republicans have resisted any federal stimulus spending.

On Friday, Obama took a step toward winning Republican support. He directed the Environmental Protection Agency to abandon rules that would have tightened health-based standards for smog. Congressional Republicans and some business leaders have objected to the proposed rules, saying they would have cost jobs.

The weakness in employment was underscored by revisions to the jobs data for June and July. Collectively, those figures were lowered to show 58,000 fewer jobs added. The downward revisions were all in government jobs.

The average work week also declined, and hourly earnings fell by 3 cents to $23.09.

"There is no silver lining in this one," said Steve Blitz, senior economist at ITG Investment Research. "It is difficult to walk away from these numbers without the conclusion that the economy is simply grinding to a halt."

 

With job creation stalled and wages declining, consumers won't see much gain in incomes. That will limit their ability to spend, which undercuts growth. Consumer spending accounts for about 70 percent of the economy.


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